How McDonald's Continues To Impress

McDonald's (MCD), along with Walmart (WMT), have been the two leading big cap names to take advantage of our "Pooring of America" theme. The theme here (for newer readers) is that as the overextended consumer returns to reality and loses his many lines of credit, namely his house ATM - along with the return of real inflation - they will be forced to move downstream? Again, we were proposing this thesis before 98% of pundits were even saying a slowdown would happen - not to mention a "recession" (not that we're in one) ;)

I will readily admit, however, my thought process is generally anti-super large cap stocks because I assume they can't appreciate in value too much. Well both these stocks have proven me wrong this past year as institutional money has flown in.

You can see the nice chart from McDonald's below - the ONLY hiccup in this maniac market that is so focused on the short term was one month they reported same store sales below expectations and the "investors" sold them immediately as the "story was over". That is just the era we live in. Shoot first, ask questions later. It also came at a very trying time in the market - January 08 - but in retrospect a great buying opportunity.

More good news out today... it is sort of funny - both these stocks were considered past their prime and in a long tailspin not 4-5 years ago. Funny how a real recession can change things (plus the wondrous overseas story that is McDonald's)

• Despite a tough U.S. economy, McDonald's Corp. posted an 8 percent gain in July same-store sales on Friday as hungry consumers worldwide lined up for breakfast items and the classic Big Mac sandwich.
• Many consumers have cut back on eating out amid economic weakness and rising gasoline prices, but business at the Golden Arches held up well in July, especially in the U.S.
• The United States, where McDonald's gets about 45 percent of its sales, has been under pressure for the world's largest restaurant chain as cash-strapped consumers have cut back on spending.
• Same-store sales, or sales at stores open at least 13 months, grew 6.7 percent in the U.S.
• Total sales worldwide soared 15.9 percent. The world's biggest hamburger chain attributed the strong domestic performance to its focus on breakfast, chicken and drink items.
• International sales have typically been strong for McDonald's -- a trend that continued in July. Same-store sales jumped 7.6 percent in Europe, led by sales in Britain, France and Russia. And in the Asia-Pacific, Middle East and Africa region, same-store sales climbed 7.2 percent because of extended hours and menu items.

We've come to expect these great international results, but the results in the U.S. are bordering on extraordinary. Trust me, to some degree this is a forced migration as people in the bottom 40% are being priced out of higher fare places to eat. As cold-hearted capitalists - we just cheer on McDonald's. But as people who observe what is really going on in this country for the many (who don't have a dime to invest in a mutual fund) - the domestic strength in these two companies does not bode well.

And frankly if we (as I believe) enter into a global competition for natural resources (even after we exit this "global slowdown") inflation will remain high, and wages will continue to not keep up (continuing a trend the past decade), then I believe these current trends will continue for quite a long time even after we "recover" from the current malaise. Of course the underbelly will be hidden by "aggregate GDP growth" and other such statistics that have been been hiding the migration of wealth into fewer hands the past 2 decades.... and a great many of our people simply will continue to be unable to "keep up". Most turned to credit to try to over the past 10 years, and now that is blowing up on them.

Ah well, we'll just roll out stimulus checks every 4-6 months for the next 20 years to keep the party going and keep the sheep among us satiated so they don't get peeved enough to really cause trouble.